Summers drops Citigroup ties

TROUBLE AHEAD?：Lawrence Summers, who is in the running to be nominated as the US Fed’s next chairman, faces opposition about his links to financial institutions

Bloomberg

Sun, Sep 15, 2013 - Page 13

Former US treasury secretary Lawrence Summers has suspended ties with Citigroup Inc while the White House considers nominating him to serve as the Federal Reserve’s next chairman, the company said.

“Mr Summers has withdrawn from participation in all Citi events while he is under consideration to be chairman of the Federal Reserve,” a spokeswoman for the firm, Danielle Romero-Apsilos, said on Friday in an e-mailed statement.

Summers, a Harvard University professor and former top economic adviser to US President Barack Obama, was to give the keynote address on challenges to the global economy at a Citigroup research seminar on Oct. 13, according to an invitation on the Web site for the firm, the third-biggest US lender. The Washington event coincides with the annual meetings of the World Bank and the IMF.

Citigroup hired Summers, 58, “for small private-bank client and institutional client meetings,” Romero-Apsilos said in an earlier e-mailed statement. He provided “insight on a broad range of topics including the global and domestic economy.”

Donald Kohn, 70, a former Federal Reserve vice chairman who is now a senior fellow at the Brookings Institution, is also listed as a speaker at the Citigroup event. Kohn declined to comment.

Kohn was US Federal Reserve Chairman Ben Bernanke’s top adviser during the financial crisis and is a member of the Bank of England’s Financial Policy Committee, a new unit specifically charged with removing or reducing systemic risk.

Part of the next Federal Reserve chairman’s job will be overseeing the largest bank holding companies, assuring their safety and soundness and implementing dozens of new regulations under the 2010 Dodd-Frank Act that could crimp their profits. The Federal Reserve is a direct supervisor of New York-based Citigroup and annually tests it and other large banks’ durability against financial stress.

Summers faces opposition from Senate Democrats concerned about his ties to financial institutions. He was an advocate of financial deregulation before a meltdown in US mortgage finance led to the near-collapse of the banking system in 2008.

Senator Jeff Merkley said in a July interview that he was “extraordinarily skeptical” about the possibility of a Summers appointment.

“If you nominate someone who is a life-committed deregulator to be in a regulatory position, and if you believe regulation is necessary to prevent fraud, abuse, manipulation and so forth, then there’s a lot of questions to be asked: Why is this person appropriate?” Merkley asked.

Senator Jon Tester and Senator Sherrod Brown indicated on Friday that they would vote against a Summers nomination.

Brown is a “likely ‘No’” vote if Summers is nominated, spokeswoman Meghan Dubyak said. Tester would not support Summers, spokeswoman Andrea Helling said.

The three lawmakers are on the Senate Banking Committee, which votes on a nominee to the top Fed post before final consideration by the full Senate.

Summers served Obama as head of the National Economic Council in 2009-2010. Citigroup received a US$45 billion bailout during the turmoil, which it later repaid.